Chronicles Of Depression 2.0: #327: Illegals

Three years ago, Jose Perez purchased a small condo northeast of San Francisco for nearly $250,000. Since then, the first-time buyer has watched the housing market collapse.

But Perez has managed better at avoiding foreclosure than thousands of other U.S. homeowners who bought at the peak of the market.

What makes his case special is that Perez is an illegal immigrant.

Home loans held by illegal immigrants in California and across the nation generally have had fewer delinquencies than similar loans held by U.S. citizens, in part because of stricter lending requirements, according to banks, insurers and Realtors.

“Every indication is that their performance is better than the average” mortgage account, said Tim Sandos, president of the National Assn. of Hispanic Real Estate Professionals.

More than 12,000 home loans were issued in recent years through a special program that relies on government-issued taxpayer identification numbers instead of Social Security numbers, according to the association.

The identification numbers, known as ITINs, were designed for foreign-born residents living legally in the U.S. but are widely acknowledged to be used primarily by illegal immigrants.

The real estate association does not keep statistics on foreclosure rates. But it has reported that the delinquency rates for taxpayer identification loans were 1.15% or lower in 2006, compared with about 3.5% for other home loans.

Although illegal immigrants are also feeling the effects of the downturn in the U.S. economy, Sandos and others cite one major factor for the success of taxpayer identification loans: stricter requirements, including larger down payments, pre-purchase counseling and fixed mortgage rates.

But there is another reason, Sandos said.

“They come for the promise of a better future,” he said. “They come for the promise of homeownership. Once they have it, they are going to move heaven and Earth to keep it.”

Perez said that when he lost his job as a chef, his wife started working as a housecleaner. The couple dipped into their savings to pay the bills. Twice, they paid the mortgage on the 16th, one day past their grace period. But in July, Perez started a new job and resumed his on-time payments.

Emphasis added by me.

More, interesting:

Many of the mortgages nationwide came out of a partnership between Citibank and Acorn Housing, a nonprofit group that helps the poor. Citibank said the taxpayer identification loans have some of the lowest delinquency rates among all affordable-lending programs.

“We believe that it has been a very successful program in terms of delinquencies,” said Mark Rodgers, vice president of public affairs for Citi consumer banking. But Rodgers said it was too early to gauge foreclosure rates, because nearly all of its loans are less than 2 years old.

Emphasis added by me.

Yeah, good luck collecting if such people are rounded up and deported!

But then there’s this, which I also always suspected:

Bruce Dorpalen of Acorn Housing said he has seen few foreclosures among undocumented home buyers enrolled in the Citibank program.

He said many buyers own their own businesses, have U.S.-born children and have money saved. If they do get into financial trouble, he said, many have an extended family safety net.

“If someone lost a job, there would be other people stepping in to help find a job or make the payments,” he said.